Official interest rates and inflation are on the move, but don’t panic: stick to good business practices
With rising inflation and higher interest rates, it is a challenging time for many businesses. The Governor of the Reserve Bank said recently he expected inflation could hit 7 per cent by Christmas and predicted it would not fall until the first quarter of next year.
The Australian Bureau of Statistics (ABS) revealed that 57 per cent of all entities across the country have seen an increase in costs over the past three months. In response, the Fair Work Commission has just raised the minimum wage by 5.2%. The Reserve Bank also indicated interest rates will most likely increase further. Business may now need to revisit their estimates for the next financial year to factor in the rising costs with everything from petrol to lettuces showing steep price hikes.
Tips for business:
Factor in wage increases
With rising inflation, expect pressure for wage increases to grow across all industries. This should be factored into any forward planning, even if it means cutting into profit margins. With a tight labour market, pressure for skilled employees is tough and finding the right people may depend on providing competitive rates of pay.
Consider your debts and payment plans
Now is a good time for small-to-medium-sized businesses to review company debts and make sure that any business plans are updated in line with higher inflation and higher repayments on various loans and overheads. Seek advice from financial advisers at dmca and your lenders to find out where you can adjust payments – just don’t wait to take action. Also remember to factor in any outstanding debts you may have with the Australian Taxation Office. It is possible to negotiate payment plans that will make cash flow easier.
Watch your cashflow and consider financial software
When times are tough, cashflow is more important than ever. To ensure your business remains profitable, you may have to need to review your pricing strategies and/or offerings and honestly evaluate if you can afford to absorb cost increases, or if you will need to pass those on to customers.
Consider investing in industry specific financial software to make invoicing and to track payments and forecast more efficient (ask your adviser at dmca about options).
And most importantly: remember to invoice immediately when work is finished and make the terms of payment known to clients. Don’t be afraid to call when bills become overdue.
Get your books in order
With tax time approaching, make sure you have everything accounted for. In difficult times the last thing a business owner needs is an audit from the ATO. Make sure you keep copies of expenses recorded and ensure your GST payments are up to date. If you are struggling with the mountain of red tape and paperwork, talk to your dmca adviser who can assist.
Remember customer service is king
There is one thing that can help a business stand out from the crowd. Great service. July 2022 could be the time to revitalise you’re offering and train up staff to provide a great customer experience. Expect more customer churn in the difficult times so ensure your business plan also includes strategies to retain customers, not only with competitive pricing options, but also with articulation of value. The pandemic has meant more and more people are working online from home so convenience, ease of use, and a superior online experience are essential – however, being able to contact a real person easily will also be essential.
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